Home prices up 2.8% in March qtr

AUSTRALIAN home prices powered ahead in the first three months of 2013, but economists say there's little chance another housing boom is on the horizon.

Home prices have risen by an average of 2.8 per cent across Australia's capital cities since the start of January, as buyers take advantage of low interest rates.

Hobart experienced the fastest growth, with prices up 6.1 per cent, followed by Perth, with a rise of 4.3 per cent, the latest RP Data-Rismark hedonic home value index found.

Adelaide had the weakest housing market during the quarter, with prices sliding 0.5 per cent.

CommSec chief economist Craig James said low interest rates, and improvements in the global economy had given buyers the confidence to come back into the market.

"It appears that people are starting to come back from underneath their beds and are starting to get on with life," he said.

The Reserve Bank of Australia cut the cash rate to three per cent in December, equal to its lowest level on record, while discount mortgage rates charged by the major banks have fallen to as low as 5.6 per cent.

JP Morgan economist Ben Jarman said the housing market was making up lost ground after 18 months of weakness.

"I think what we are seeing here is a bit of a relief rally," he said.

"We essentially saw house prices fall for about 18 months so what we're seeing now is just a bit of a recovery."

But he said other figures showed consumers remained hesitant to take on new debt, which meant the current rate of growth in prices was unlikely to be sustained.

"Ultimately, we're still sceptical that the housing market can give you much of a sustained lift because the trends in credit growth aren't strong enough to support that," he said.

Mr James agreed the rate of growth was likely to slow during the rest of 2013 and said, on average, buyers should expect price growth of around two to three per cent per year.

"On average I think two to three per cent growth in home prices is providing reasonable growth for home owners and won't be enough to unsettle the RBA," he said.